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Adipose tissue (AT) hypoxia occurs in obese humans and mice. Acute hypoxia in adipocytes causes dysregulation of adipokine secretion with an increase in inflammatory factors and diminished adiponectin release. O2 levels in humans range between 3 and 11% revealing that conventional in vitro culturing at ambient air and acute hypoxia treatment (1% O2) are performed under non-physiological conditions. In this study, we mimicked physiological conditions by differentiating human primary adipocytes under 10% or 5% O2 in comparison to 21% O2. Induction of differentiation markers was comparable between all three conditions. Adipokine release by adipocytes differentiated at lower oxygen levels was altered, with a marked upregulation of adiponectin, IL-6 and DPP4 secretion, and reduced leptin levels compared with adipocytes differentiated at 21% O2. Isoproterenol-induced lipolysis was significantly elevated in adipocytes differentiated at 10% and 5% compared with 21% O2. This effect was accompanied by increased protein expression of β-1 and -2 adrenergic receptor, HSL and perilipin. Conditioned medium (CM) of adipocytes differentiated at the three different conditions was generated for stimulation of human skeletal muscle cells (SkMC) or smooth muscle cells (SMC). CM-induced insulin resistance in SkMC was comparable for the different CMs. However, the SMC proliferative effect of CM from adipocytes differentiated at 10% O2 was significantly reduced compared with 21% O2. This study demonstrates that oxygen levels during adipogenesis are important factors altering adipocyte functionality such as adipokine release, in particular adiponectin secretion, as well as the hormone-induced lipolytic pathway.